UK House Prices Rise in June Despite High Mortgage Rates

The average UK house price rose by 0.2% in June, despite mortgage rates remaining high, according to a recent index by Nationwide Building Society. This modest monthly growth leaves the average price of a house in the UK at £266,064.

UK house prices rise in June

The slower rate of growth in June compared to May, when prices increased by 0.4% month on month, is attributed to the impact of higher mortgage rates on housing affordability. Robert Gardner, Nationwide’s chief economist, stated, “While earnings growth has been much stronger than house price growth in recent years, this hasn’t been enough to offset the impact of higher mortgage rates, which are still well above the record lows prevailing in 2021 in the wake of the pandemic.”

Mortgage rates remain high

For example, the interest rate on a five-year fixed-rate mortgage for a borrower with a 25% deposit was 1.3% in late 2021, but in recent months, this has been nearer to 4.7%. As a result, housing affordability is still stretched. Today, a borrower earning the average UK income buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 37% of take-home pay, well above the long-run average of 30%.

The total number of transactions is down by about 15% compared with 2019, when prices were at a record high, Nationwide said. Mortgage rates have remained stubbornly high after The Bank of England held the base interest rate at 5.25% for longer than expected.

Mortgage rates affect housing affordability

Earlier this year, economists had expected the Bank to cut rates as soon as May or June. But policymakers voted to hold them amid signs that some inflation indicators had still not fallen as fast as anticipated.

Best Schemes for First-Time Buyers

Alice Haine, personal finance analyst at Bestinvest, said, “The Bank of England may have chosen to hold interest rates at a 16-year high of 5.25% at its rate-setting Monetary Policy Meeting in June, but there were heavy hints that a summer rate cut may still be on the cards, offering hope to first-time buyers and existing homeowners that borrowing costs may ease at a more rapid rate.”

Mortgage rates may ease soon

Lenders including NatWest and Barclays have slashed rates by up to 0.31% with HSBC quickly announcing that they would be following suit.

How to Get the Best Deal on Your Mortgage

If you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time. There are several ways to land the best deal. Usually, the larger the deposit you have, the lower the rate you can get. If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.

Get the best deal on your mortgage

You can lock in current deals sometimes up to six months before your current deal ends. Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost. But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.

To find the best deal, use a mortgage comparison tool to see what’s available. You can also go to a mortgage broker who can compare a much larger range of deals for you. Some will charge an extra fee, but there are plenty who give advice for free and get paid only on commission from the lender.

Mortgage broker

You’ll also need to factor in fees for the mortgage, though some have no fees at all. You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.

Mortgage fees

You can use a mortgage calculator to see how much you could borrow. Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.

Mortgage calculator

You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports, and bank statements.

Mortgage documents